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A statement from Prime Minister Benjamin Netanyahu's office said the 26 prisoners, jailed before a 1993 interim accord was signed, would be released. However, their actual discharge won’t take place until at least 48 hours after their names are made public so as to give Israelis the opportunity to appeal.

The Cabinet vote set into motion the second leg of prisoner releases agreed upon before Israel and the Palestinians renewed long-frozen peace negotiations.

Twenty-six Palestinian prisoners have been released so far. In all, Israel said that it would free 104 inmates in four stages.

Amid the latest step in the delicate peace negotiations, Prime Minister Benjamin Netanyahu also plans to approve new Israeli settlement construction to appease hard-liners who oppose the prisoner release.

Talks between Israelis and Palestinians broke down three years ago over the settlement issue.

Housing Minister Uri Ariel, of the pro-settler Jewish Home party, said in several television interviews that freeing prisoners charged with having attacked or killed Israelis "doesn't contribute to peace, and only leads to more terrorism."

Israel's chief negotiator, Justice Minister Tzipi Livni, responded in an interview with Israel's Channel 2 television that Ariel's party "doesn't want negotiations," adding: "If they have another solution, let them tell us what it is."

The population in West Bank settlements, illegal under international law, grew twice as much as the population in Israel itself, Israeli military radio said in August, quoting official statistics. The figures, released by the interior ministry, showed a 2.1 percent increase in six months compared to an annual population growth of only 2 percent in Israel.

The fate of Palestinian prisoners stirs strong emotions on both sides, highlighting the competing narratives of the conflict.

Whereas many Israelis view the prisoners as terrorists for allegedly targeting civilians, many Palestinians view them as heroes and poltical prisoners, arguing they made personal sacrifices in the struggle for independence.

Gaza rocket fire

Rockets were reportedly fired from the Gaza Strip towards Israel on Monday, with at least one of them intercepted by Israel’s missile defense system, according to Israeli government sources.

Israel's military spokeswoman said that an Iron Dome interceptor shot down one rocket launched by Palestinian fighters above the city of Ashkelon, about 7 miles north of the Palestinian territory.

Another rocket fell in the sea, Israeli army said. No injuries were reported.

Within hours, Israel's air force bombed what a military spokesman described as two concealed rocket launchers in northern Gaza.

There were no reported casualties and no immediate claim of responsibility either.

The Israeli military spokeswoman said a mortar bomb was also fired across the border from Gaza on Sunday, but caused no damage or casualties.

The attacks are unusual given the relative restraint of Palestinian armed groups since last November's war between the Hamas and Israel.

However, Hamas has been challenged at times by armed fighters in Gaza.